Delphi files for Chapter 11

"We took this action because we are determined to achieve competitiveness for Delphi's core U.S. operations, and the key to accomplishing that goal is reducing these costs as soon as possible," Delphi Chairman and CEO Robert S. "Steve" Miller said in a statement.

"We simply cannot afford to continue to be encumbered by high legacy issues and burdensome restrictions under current labor agreements that impair our ability to compete."

John Butler Jr., a bankruptcy attorney for Delphi, told The Associated Press Delphi would attempt "some restructuring of its collective bargaining agreements" during the reorganization.

Delphi's union contract expires in October 2007.

Butler also said Delphi intends to attempt to scale back pension benefits because "the current level of retirement benefits is unsustainable and will eventually sink the company."

Delphi, which has lost billions of dollars, has been in discussions with the United Auto Workers and General Motors Corp. about reducing its cost structure. Kokomo's UAW Local 292 released on Thursday a list of Delphi demands of the union. They included pay cuts of more than 60 percent and reductions in health benefits.

Miller visited Delphi's Kokomo operations in September. Delphi is Kokomo's second largest employer.

During the visit, he said Delphi had to find a way to reduce costs like the job bank, which pays 4,000 inactive employees a total of about $100 million per quarter.

According to GM's agreement with Delphi, some Delphi employees could "flow back" to GM when Delphi cannot use them, Miller said.

"What went wrong with that theory is that GM has lost market share," he said. "There's been no room for flowback and that's why we've had people being paid to do nothing."

In recent weeks, Miller repeatedly mentioned Oct. 17, the date a new federal bankruptcy law takes effect, as an important day for Delphi.

Delphi spokeswoman Claudia Baucus said Delphi's board of directors voted Saturday morning to file bankruptcy petitions. She said she did not know if the vote was unanimous.

Baucus said although about a week remains before the deadline, there is more than one week of work left in negotiating with GM and the UAW.

"We ran out of time given the complexity of the issues that needed to be addressed," she said.

Company background

Delphi is the world's largest automotive supplier.

A Fortune 500 company, it has about 185,000 in 41 countries on six continents.

Delphi has six divisions.

Troy, Mich., Delphi's world and North American headquarters, is home to four Delphi divisions: Delphi Product & Service Solutions, Delphi Thermal & Interior, Delphi Energy & Chassis and Delphi Packard Electric.

Saginaw, Mich., is the headquarters of Delphi Steering.

Kokomo is the world divisional headquarters of Delphi Electronics & Safety. About 5,500 of the division's 29,900 employees work here.

Among the products made in Kokomo are engine controls, transmission controls and air bag controls.

Delphi stock plummeted to close at $1.12 Friday on the New York Stock Exchange as investors saw a Delphi deal with GM and the UAW as increasingly unlikely.

UAW statements

UAW president Ron Gettelfinger and vice president Richard Shoemaker issued a joint statement Saturday, reacting to Delphi's filing.

"Delphi's decision would be extremely disappointing under any circumstances, but it is all the more so in light of the company's announcement on Friday -- just one day before filing bankruptcy -- that it had sweetened the severance packages for Delphi's 21 most highly compensated executives because the old severance package was -- as a Delphi spokesperson put it -- 'uncompetitive.'

"Once again, we see the disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices from their hourly workers, engineers, administrative and support staff, mid-level managers and others. All of them deserved better from Delphi's senior executive leadership."

Some Kokomo Delphi workers have voiced displeasure in recent weeks with the amount of Delphi's executive salaries.

Baucus said previously that Delphi's white-collar salaries were in line with other Fortune 500 companies.

George Anthony, chairman, and Sona Camp, president, of Local 292 released a joint statement on Delphi's decision.

"The UAW has several options during these bankruptcy proceedings," the statement says. "A reorganization bankruptcy usually takes several months to complete. No one knows the final outcome.

"During the court proceedings, business will continue as usual for our UAW members. We will continue to work, be paid and receive our present benefits."

The UAW hired a law firm in July that specializes in bankruptcies, the Local 292 statement says.

Stock tip: Sell

Craig Dunn of Liberty Financial Group's Kokomo office said Saturday he has never recommended to his clients that they buy Delphi stock.

"We've been telling people to sell for a long time," he said. "Anything you can get at this time is probably better than you'll get anywhere down the road."

Although he expects a small number of speculators to buy Delphi stock Monday, Dunn said investors should resist the temptation.

Dunn said the 401(k) assets of Delphi employees are safe from Delphi's creditors.

Delphi Electronics & Safety, which has been comparatively profitable within Delphi's North American operations, should fare well in Delphi's restructuring, Dunn said.

"I don't see $10 and $12 an hour jobs in Kokomo," he said.

GM comments

GM released a statement Saturday as well.

"GM plans to work constructively in the Chapter 11 proceedings with the court, Delphi, its unions and other participants in Delphi's restructuring process," the statement reads. "GM's goal is to pursue outcomes that are in the best interests of GM and its stockholders, and that enable Delphi to continue as an important supplier to GM."

GM said Delphi's restructuring should reduce the price and improve the quality of many GM supplies.

Dunn said Delphi's restructuring could aid GM in the long run.

"It looks to me it that it could be a pretty good endgame on General Motors' part," he said.

The Associated Press contributed to this report.

©2005 The Kokomo Tribune.